Stocks decline as China enters bear market

Traders said offshore liquidity was squeezed earlier in the week as a result of state-backed banks buying, at the central bank’s behest, to push overnight borrowing rates in Hong Kong to record highs, making it prohibitively expensive to bet against the yuan.

The ChiNext Index, the NASDAQ-style board of growth enterprises, lost 2.86 percent to close at 2,112.9 points. The euro fell to $1.0823 from $1.0834.

Data from the nation’s central bank showed earlier Friday that Chinese banks issued 597.8 billion yuan ($US90.7 billion) of new yuan loans in December, down from 708.9 billion yuan in November and below the 700 billion yuan forecast made by economists polled by The Wall Street Journal.

China’s exports exceeded expectations in the last month of 2015, rising 2.3 percent from a year ago in yuan-denominated terms. France’s CAC 40 dropped 1.4 percent to 4,252.75. USA stocks were poised for a solid open, with Dow futures and the broader S&P 500 futures up 0.5 percent.

OIL: The price of crude oil fell again after a rebound in the previous session, hovering slightly above $30 a barrel.

While Asian stock markets cheered the China data surprise, Chinese stocks fell. The local currency has gained 2 per cent year-to-date, as turmoil in Chinese and global markets have sent investors to rush for safety.

Meantime, the PBOC set the midprice for the euro against the onshore yuan weaker by 257 basis point to 7.1468, while the yuan’s reference rate against every 100 yen was at 5.5857, weaker by 84 basis point.

Imports decreased 7.6 per cent year on year, receding for 14th consecutive month, but improving from the previous month’s 8.7-per cent, Xinhua report said. The data suggest a weakening in the yuan may be helping boost demand for Chinese products, providing welcome support for the slowing economy.

The Australian slid 0.2 percent to US$0.6965, while the New Zealand dollar was down 0.1 percent at US$0.6528.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.1 per cent, to 3,221.57, while the Shanghai Composite Index gained 2.0 per cent, to 3,007.65 points.

“More clarity and communication around the exchange rate regime would be useful”, International Monetary Fund spokesman Gerry Rice told a regular news briefing in Washington on Thursday.

The benchmark 10-year U.S. Treasury yield plumbed its lowest levels since late October as investors sought safety in government debt. Trading in foreign exchange markets was subdued.

The dollar index edged up 0.2 percent to 99.192, extending its recovery from this week’s low of 98.252 set on Monday.